U.S. Stocks Retreat Modestly as G-20 Summit Gets Under Way

U.S. stocks on Friday traded down on the last trading day of the week and month, as investors prepare for a highly anticipated meeting between President Donald Trump and Chinese leader Xi Jinping on the sidelines of the G-20 summit in Argentina.

How are benchmarks performing?

The Dow Jones Industrial Average YMZ8 fell 42 points, or 0.2%, at 25,295, the S&P 500 index SPX was off less than a point, or 0.1%, at 2,737, while The Nasdaq Composite Index COMP slipped 6 points at 7,265, a decline of 0.1%.

On Thursday, the Dow slid 27.59 points, or 0.1%, to 25,338.84, while the S&P 500 index dropped 5.96 points, or 0.2%, to 2,737.83. The Nasdaq shed 18.51 points, or 0.3%, to 7,273.08.

The Dow is set to post a weekly gain of 4% and a monthly advance of about 0.6%, the S&P 500 is poised for a weekly rise of 3.9% and a 0.8% November increase, while the Nasdaq is set to show a weekly climb of 4.6%, but a monthly decline of 0.6%.

What’s driving markets?

Trade talks between China and the U.S. in Buenos Aires are at the center of investors’ attention, as presidents Trump and Xi are scheduled for a face-to-face meeting Saturday, where it is hoped the two sides can come to a deal on delaying new or expanded tariffs, which the American president has threatened to implement in January, absent significant changes to Chinese trade policy.

The meeting comes on the heels of a week of speeches by Federal Reserve officials who appeared to deliver a dovish message to investors, who have been fearful that the central bank will raise rates aggressively in 2019 after a widely expected 25 basis-point hike in rates in December.

Trump on Thursday said he was “close to doing something with China” but wasn’t sure he wanted to, citing revenue from tariffs on Chinese imports. He tweeted that “billions of dollars” are pouring into the U.S. Treasury from tariffs and that there is “a long way to go.”

In contrast to the protracted trade standoff between the U.S. and China, leaders of all three North American nations gathered in Argentina Friday to formally sign the new U.S.-Mexico-Canada Agreement, meant to replace the Nafta pact that has governed North American trade for more than 20 years. The agreement still needs to be approved by the three countries legislatures before the deal can take effect.

Investors are hopeful that the U.S.-China trade negotiations will be resolved in a similar way as the U.S.-China-Mexico pact, which was agreed to only after the president issued a series of tough statements, and engaged in significant brinkmanship, before finally compromising on a deal at the 11th hour.

What Fed speakers and data are on tap

New York Fed President John Williams said that the Federal Reserve is undergoing a strategic review of its interest-rate policy, which could lead to the central bank tolerating higher inflation rates than it is current 2% target, during a speech on Friday.

Meanwhile, a reading of Chicago purchasing managers index for November was slated for 9:45 a.m. Eastern Time.

What were strategists saying?

Tom Essaye, president of the Sevens Report, argued in a Friday morning note to clients that the market is expecting a “trade war truce” to result from this weekend’s trade talks, in which “Trump and Xi agree to freeze tariffs at current levels, and begin a multi-month negotiating period aimed at a comprehensive deal.”

If we don’t get this truce, however, and signals emerge that current 10% tariffs on $250 billion in Chinese imports will be raised in January, Essaye predicts a significant selloff. “We’d likely see the post Powell bounce erased, and depending on what happens with Italy and the EU, a serious test of support at 2600 for the S&P 500 before year end,” he wrote.

“Adding to all of this, yesterday, U.S. President Trump tweeted that ‘there is a long way to go’ with regards to tariffs imposed to Chinese imports, and while speaking to reporters before departing for Argentina, he noted, ‘I think we’re very close to doing something with China but I don’t know that I want to do it,’ wrote Charalambos Pissouros, senior market analyst at JFD Brokers, in a Friday note.

“The Fed minutes confirmed the case for a December hike, but revealed uncertainty with regards to the path of future rate increases,” he added.

Which stocks were in focus?

Shares of Marriott International Inc. MAR were in focus after the hotel management company said that it encountered a data breach affecting hundreds of millions of its customers. Marriott’s stock was down 5.7% at the start of trade.

GameStop Corp. GME stock is tumbling more than 9% Friday, after the company issued weak full-year guidance for 2018. The stock is down 26.4% on the year.

Workday Inc. WDAY shares were in focus before the start of trade Friday, following a Thursday evening earnings report that beat Wall Street expectations for earnings and revenue in the third quarter. These beats helped convince Stifel Nicolaus to raise its price target for the stock from $150 to $160, and the stock is up 8.7&.

Shares of Laboratory Corp. of America HoldingsLH were down 5.7% at the open Friday, after the company cut it is full-year 2018 guidance.

PVH Corp. PVH stock is up 2.9% in early trade Friday, after the Calvin Klein parent company reported third-quarter earnings above analysts estimates and raised its full-year 2018 guidance.

Shares of Goldman Sachs are in focus Friday, down 2.3%, after reports that the Federal Reserve is intensifying its investigation into the bank’s relationship with the 1MBD sovereign-wealth fund. The news comes as Bank of America downgraded the stock, citing uncertainty surrounding scandal.